Sunday, June 8, 2014

The Eurozone's New Bailout Fund

Philipp Vorndran, of Flossbach & von Storch, and James Turk, Director of the GoldMoney Foundation, talk about the unsustainable level of US government debt. They discuss the possible combinations of growth, taxes, austerity and inflation necessary to reduce the debt burden. Philipp explains that as long as it can print its own money, the US government will never default on its debt. The real question is how much the dollars it repays it with will be worth. They also talk about the US sovereign debt bubble, but Philipp does not expect rising interest rates, because of central bank policy, including Operation Twist.

They talk about stocks. Philipp explains that dividends and cash flow has to be analysed together with risk, sustainability of earnings and risk. They also talk about the Eurozone's new bailout fund and whether it will be enough to save the euro. Philipp explains the difference between the EFSF and the ESM and the process for their approval. He explains that the size of the EFSF is enough to rescue small countries like Greece or Ireland, but too small to deal with problems in Italy or Spain.

They talk about whether Greece can leave the euro. Philipp explains that there is no doubt that Greece is bankrupt. He talks of a 75% haircut on Greek debt and also expects strong opposition to austerity from Greek public opinion. He talks of the danger of bank runs in Portugal and other countries. Portugal, Greece and Ireland could still be contained and even leave the euro without destroying it.